What Is an EIN and How Do You Get One?
What Is an Employer Identification Number and How Do You Get One?
When you start a business, you will presumably be offering some sort of product or service in exchange for money. This is about as far as this discussion can go without bringing up the Internal Revenue Service (IRS). Whether you are making money or losing it, the IRS wants to know about it and the most efficient way for them to track your financial activities is through a special number designated solely to you and your business. This number is called an Employer Identification Number (EIN). To obtain an EIN, you will need to provide the following:
Legal structure of business
Legal name of business
Mailing and physical address of business
Name of responsible party and their tax ID number, social security number or alternative EIN
State of organization or incorporation, if applicable
Expected number of employees over the course of following year, if applicable
Closing month of accounting year
Startup date
Reason for EIN
Prior EINs, if applicable
The IRS provides a FAQ sheet explaining some of the nuances in applying for an EIN, but overall the process is not very difficult. The best piece of advice I can give is to make sure you’re on the actual IRS’s website, not a third party provider. If you’re prompted to enter payment details, you’re on the wrong site. You should not have to pay any money to register for an EIN, believe it or not obtaining an EIN is free! It’s also immediate, once you answer all the questions the IRS website generates a PDF. Please please please download and keep that PDF for your files, finding your EIN once you’ve lost it is a total pain.
Do You Need an EIN to Run a Business in Colorado?
Not all business entities need an EIN. For example, sole proprietors can simply use their social security numbers on tax forms. Additionally, individuals solely owning limited liability companies and operating as a “disregarded entity” can technically also use their social security numbers rather than an EIN.
However, if you have a company for purposes of limiting your personal liability, I highly recommend you obtain an EIN and a bank account for that company, then transact all company business through that account. This is the first line of defense in keeping someone from ‘piercing the corporate veil’ and putting your personal assets at risk. You need an EIN in order to open the company’s bank account.
Although you may be tempted to shirk the paperwork and stick with your social security number, you may also want to consider the fact that you could be sending tax documents to clients and your social will be on those documents. An EIN can protect you from identity theft. Further, if you intend to grow your business or acquire employees, you will need an EIN. Really, there is no reason not to apply for an EIN, besides did I mention that it’s free?
You Can Apply for an EIN by Yourself, but You Don’t Have to
It is true that the process of applying for an EIN is fairly straightforward and you probably don’t need to hire an attorney solely for this particular task. That being said, starting a Colorado business is wrought with decisions best made under the watchful guidance of a Denver start up attorney. SK&S can easily tackle your EIN application process while handling other aspects of your business start up so you can focus on developing your products, services and clientele. Ultimately the costs remain low but the benefit is high; after all, I’m not sure you’ve heard, but the EIN itself is free.
